Bluest of the blue
To survive an uncertain market, investors are told to concentrate on “high-quality” stocks, said Penelope Wang in Money. “The advice is so common that it’s almost a cliché.” But what, exactly, does “high-quality” mean? First, consider return on equity (ROE)—that is, how much the company made relative to how much shareholders invested. Quality stocks have ROEs of 15 percent or more. Next, look for companies with heaps of cash that they use to “routinely pay generous dividends” or, like Google, to expand through acquisitions. Finally, most high-quality companies have “competitive advantages to keep rivals at bay.” If you’re still not sure what to look for, find a fund that does. Blue Chip Growth, FMI Large Cap, and Jensen Fund all stick with “the bluest of the blue chips.”
Symbols with secret messages
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The trading symbols, or “tickers,” used for exchange-traded funds have become the “vanity license plates of the ETF world,” said Jason Zweig in The Wall Street Journal. Investment firms are “vying furiously to outdo each other” in creating catchy acronyms for their funds. There’s BIL for Treasury bills, JO for coffee, and TAN for solar stocks, to name a few. The motivation isn’t just to be cute, but to stand out among a sea of confusingly named alternatives. “Researchers have shown that U.S. stocks with catchy tickers like BID or LUV perform better than those with unpronounceable trading symbols—at least in the short run.” But just because a fund calls itself SKOR (IQ South Korea Small Cap Index ETF) doesn’t mean it is one.
This card cuts you off
MasterCard and Citigroup may soon team up to offer credit card customers a “financial chastity belt of sorts,” said Ron Lieber in The New York Times. This service, called inControl and currently offered by Barclays in Britain, lets cardholders set precise limitations on such factors as where they can use their credit cards and how much they can charge in a given month. When cardholders—or identity thieves—attempt to break those self-imposed rules, unsanctioned transactions are simply declined. Such a simple way of curbing spending is one of those financial innovations that makes “you slap your forehead and wonder why it didn’t exist before.”
